Evaluate the possible benefits of a demerger
Edexcel International A-Level Economics Unit 3 October 2022
In January 2022 the Australian firm Peak Minerals demerged from Vertex Minerals. The main reason for the demerger was to enable Peak Minerals to focus on copper and gold mining production in Western Australia. Evaluate the possible benefits of a demerger. Illustrate your answer with an appropriate diagram(s). (October 2022)
Plan
- Paragraph 1
- Argument: one advantage of demergers is less diseconomies of scale
- Diagram: economies of scale diagram
- Evaluation: this can also lead to a fall in economies of scale
- Paragraph 2
- Argument: another advantage of demergers is an increase in productivity due to more motivated staff
- Diagram: fall in costs
- Evaluation: however, costs could rise due to duplicate staff roles
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